Summary
holding that claims under both the Minnesota Deceptive Trade Practices Act and Minnesota common law fraud fail when there is no evidence that the defendants knew the omitted information
Summary of this case from Wozniak v. Ford Motor Co.Opinion
No. A06-1730.
Filed: September 4, 2007.
Appeal from the District Court, Clearwater County, File No. C4-06-106.
Richard I. Diamond, Richard I. Diamond, P.A., (for appellants).
James W. Haskell, Haskell Law Firm, PLLC, Bemidji Professional Building, (for respondents Evje, et al.).
David J. McGee, Ryan J. Wood, Thompsen Nybeck, P.A., (for respondents Atkins, et al.)
Sonia M. Sturdevant, Richard J. Leighton, Reyelts Leighton Bateman Hylden Sturdevant, Ltd., (for respondents Richter, et al.)
Raymond J. German, Raymond J. German, Ltd., (for respondent Bell)
Considered and decided by Hudson, Presiding Judge; Lansing, Judge; and Halbrooks, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
Appellants Linda and Eric Nance challenge the district court's grant of summary judgment in favor of respondents Daniel and Valerie Evje (collectively Evjes); respondents Mike Atkins, Century 21/Dickerson Realtors, and Mark Dickerson (collectively Atkins); respondents Nathan Richter and ERA Pederson Realty, Inc. (collectively Richter); and respondent Mike Bell. Because there are no genuine issues of material fact and the district court properly applied the law, we affirm.
FACTS
In 2000, the Evjes purchased a home from Bell, the builder of the home. Atkins was the Evjes' real-estate agent. During their occupation of the home, the Evjes made minor structural improvements and significant landscaping alterations.
In November 2003, appellants and the Evjes entered into a purchase agreement for the home. Atkins was the listing agent; Richter was appellants' agent. The original seller's disclosure statement was incomplete: it did not contain the second page of the form. Thereafter, the parties made closing on the purchase agreement contingent on the Evjes providing a complete seller's disclosure statement. Neither the Evjes nor Atkins ever provided the missing second page. They did provide a substitute page captioned with Richter's firm's letterhead. The Evjes disclosed that they had never experienced any water intrusion, mold, or rodent infestation.
Prior to closing, appellants and Richter inspected the home and observed that it was built on a downward slope. They did not observe any defects contradicting the Evjes' disclosure. Appellants did not commission an independent inspection. Appellants moved into the home in December 2003. By March 2004, appellants began to notice signs of mold, water intrusion, and rodent infestation.
In May 2005, appellants initiated this case against the respondents. Appellants asserted causes of action for breach of contract, fraudulent and negligent misrepresentation, fraud, negligence, breach of fiduciary duty, breach of expressed and implied warranties, and violations of the Consumer Fraud and Deceptive Trade Practices Acts. Appellants sought rescission, damages, costs, interest, disbursements, and attorney fees.
All parties filed motions for summary judgment. In July 2006, the district court granted respondents' motions, denied appellants' motion, and dismissed appellants' claims with prejudice. This appeal follows.
DECISION
On appeal from a grant of summary judgment, this court reviews the record to determine whether there are any genuine issues of material fact and whether the district court erred in its application of the law. Zimmer v. Carlton County Co-op Power Ass'n, 483 N.W.2d 511, 513 (Minn.App. 1992), review denied (Minn. Jun. 10, 1992). "[T]he reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). Appellate courts review de novo the district court's application of the law. Frost-Benco Elec. Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984).
A moving party is entitled to summary judgment "when there are no facts in the record giving rise to a genuine issue for trial as to the existence of an essential element of the nonmoving party's case." DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997) (quotation omitted). "[T]he party resisting summary judgment must do more than rest on mere averments" and must present sufficiently probative evidence on each essential element of its case to permit reasonable minds to draw different conclusions. Id.
I
As a preliminary matter, we note that while rule 52.01 of the Minnesota Rules of Civil Procedure does not require findings of fact in summary-judgment matters, and while appellate courts review de novo the district court's application of the law, meaningful appellate review of summary-judgment proceedings is enhanced when a district court states the basis for the summary judgment, particularly in litigation that involves multiple claims. Here, however, the district court issued a one-page order. And, as appellants' counsel noted at oral argument, the lack of analysis made it impossible for appellants to determine the basis of the district court's decision, thus undermining the parties' confidence in the decision-making process and impeding appeal. For these reasons, we encourage district courts to articulate their reasoning and analysis when ruling on motions for summary judgment.
Appellants first argue that a genuine issue of material fact exists as to whether respondents Evjes, Atkins, and Richter provided them with a complete seller's disclosure. Minnesota law requires sellers of residential real property to make a written disclosure to prospective buyers of all material facts pertaining to conditions in the property of which the seller is aware that could adversely affect the use and enjoyment of the property. Minn. Stat. § 513.55, subd. 1(a) (2006). "The disclosure must be made in good faith and based upon the best of the seller's knowledge at the time of the disclosure." Id., subd. 1(b) (2006). If a seller fails to disclose a known adverse condition, the seller is liable for any resulting harm. Minn. Stat. § 513.57, subd. 2 (2006). But courts will not impose liability on a seller for "any error, inaccuracy, or omission" if it "was not within the personal knowledge of the seller." Id., subd. 1 (2006). Nor will courts impose liability on a seller for its failure to disclose information "that could be obtained only through inspection or observation of inaccessible portions of the real estate or could be discovered only by a person with expertise in a science or trade beyond the knowledge of the seller." Id.
Appellants argue that the Evjes failed to provide them with the second page of the disclosure form. But the record contains the second page — albeit on different letterhead than the first — which the Evjes signed. Appellants have failed to present any evidence tending to prove that the substituted second page withheld information that the original disclosed; nor have they presented evidence that the disclosure form they received was deficient. On this record, appellants have not shown that there is a genuine issue of material fact regarding whether a complete seller's disclosure was provided.
II
Appellants argue that a genuine issue of material fact exists as to whether respondents Evje, Atkins, and Richter made fraudulent or negligent misrepresentations. A person makes a misrepresentation when they make an affirmative false statement or omit certain facts "that render the facts that are disclosed misleading." Dakota Bank v. Eiesland, 645 N.W.2d 177, 183-84 n. 4 (Minn.App. 2002). To be actionable, the misrepresentation must have been made fraudulently or negligently. Id. at 184 n. 4.
Fraudulent Misrepresentation
The elements of fraudulent misrepresentation are (1) a representation; (2) that is false; (3) that pertains to a past or present fact; (4) that is material; (5) that is susceptible of knowledge; (6) which the representer knew was false or asserted as his or her own knowledge without knowing whether it was true or false; (7) which the representer made with the intent to induce another to act or be justified to act upon it; (8) which did induce or justify another to act; (9) the person acted in reliance upon the representation; (10) the person suffered damage; and (11) the representation was the proximate cause of the damage. Benson v. Rostad, 384 N.W.2d 190, 194 (Minn.App. 1986).
Appellants argue that the fact that their home experienced mold, water intrusion, and rodent infestation is sufficient evidence to prove that respondents Evjes, Atkins, and Richter made fraudulent misrepresentations. But appellants have failed to produce evidence that respondents Evje and Atkins knew that they were making false statements when they disclosed that the home had not experienced mold, water intrusion, or rodent infestation; there is nothing in the record showing that the Evjes ever experienced similar issues. Furthermore, appellants have failed to produce any evidence demonstrating that Richter made any representation pertaining to the home's condition. And because Richter was not the sellers' agent, he had no control over the representations made by the Evjes on their disclosure form. On this record, appellants have not shown that there are genuine issues of material fact regarding fraudulent misrepresentation.
Negligent Misrepresentation
The tort of negligent misrepresentation is defined as follows:
One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
Hebrink v. Farm Bureau Life Ins. Co., 664 N.W.2d 414, 420 (Minn.App. 2003) (quoting Restatement (Second) of Torts § 522(1) (1977)). The misrepresenter's subjective state of mind is irrelevant; the proper test is an objective standard of reasonable care. Safeco Ins. Co. of Am. v. Dain Bosworth Inc., 531 N.W.2d 867, 870 (Minn.App. 1995), review denied (Minn. Jul. 20, 1995). "Persons making representations are negligent when they have not discovered or communicated certain information that the ordinary person in his or her position would have discovered or communicated." Id.
Negligent misrepresentation is limited to situations where one party is providing guidance to another; there is no cause of action when the parties are engaging in an arms-length commercial transaction. Id. at 871-72. Therefore, appellants cannot assert this cause of action against respondents Evjes and Atkins.
However, appellants may assert this cause of action against Richter. As appellants' real-estate agent, he offered guidance on the transaction — an essential element of a negligent-misrepresentation claim. But appellants have failed to produce any evidence tending to prove that Richter was untruthful or that his conduct did not comport with an objective standard of reasonable care. Indeed, it was Richter who, upon seeing the disclosure statement from the Evjes, noticed that a page was missing and arranged for the Evjes to complete and sign a second disclosure statement. Moreover, he made closing contingent upon appellants' receipt of the statement. On this record, appellants have not shown the existence of a genuine issue of material fact regarding negligent misrepresentation.
III
Appellants argue that a genuine issue of material fact exists as to whether respondents Evjes, Atkins, and Richter breached a fiduciary duty. A fiduciary is defined as "[o]ne who owes to another the duties of good faith, trust, confidence, and candor." Black's Law Dictionary 640 (7th ed. 1999). "A fiduciary relationship exists when confidence is reposed on one side and there is resulting superiority and influence on the other[.] Disparity of business experience and invited confidence could be a legally sufficient basis for finding a fiduciary relationship." Toombs v. Daniels, 361 N.W.2d 801, 809 (Minn. 1985) (quotation and citation omitted).
Based on the law, we conclude that while the Evjes and Atkins cannot be characterized as appellants' fiduciaries, Richter's relationship to appellants falls within that definition. Appellants assert that Richter breached his fiduciary duty when he failed to warn them about the water-intrusion risk associated with a home built on a downward slope. But the mere fact that a house is built on a slope does not make it defective. In addition, appellants have failed to cite any authority supporting the proposition that an individual breaches a fiduciary duty by failing to warn another about a patently obvious risk. Generally, assignments of error based on mere assertion and not supported by argument or authority are waived unless prejudice is obvious. State v. Modern Recycling, Inc., 558 N.W.2d 770, 772 (Minn.App. 1997). On this record, appellants have not shown the existence of genuine issues of material fact regarding whether a fiduciary duty was breached.
IV
Appellants argue that a genuine issue of material fact exists as to whether respondents Evje, Atkins, Richter, and Bell were negligent. "The essential elements of a negligence claim are: (1) the existence of a duty of care; (2) a breach of that duty; (3) an injury was sustained; and (4) breach of the duty was the proximate cause of the injury." Anderson v. State, Dep't of Natural Res., 693 N.W.2d 181, 186 n. 1 (Minn. 2005).
The existence of a legal duty is a legal question which this court reviews de novo. Id. at 186. But appellants have failed to establish that the Evjes, Atkins, and Bell owed them a duty of care. Appellants' brief is devoid of any authority holding that parties to a residential real-property transaction owe other parties to that transaction a duty of care. Likewise, appellants' brief is devoid of any authority supporting a conclusion that a residential real-property developer, such as respondent Bell, owes a duty of care to a subsequent purchaser who lacks privity of contract and title with the developer. Therefore, this argument is waived. Modern Recycling, 558 N.W.2d at 772.
Even if we were to conclude that Bell and Richter owed appellants a duty of care, appellants have failed to produce evidence which would permit a reasonable jury to find that they caused appellants harm. Although appellants presented evidence that Bell constructed the home without a contractor's license, with the use of adulterated materials, and in violation of building codes, appellants have not shown that Bell's alleged malfeasance caused their injury. Nor have they identified any authority creating a presumption that such conduct would cause any injury they suffered. Similarly, although appellants presented evidence that Richter did not warn them about the obvious risks of water intrusion associated with a home built on a downward slope, they have not shown that Richter's alleged misfeasance caused their harm. Because appellants have failed to produce evidence on an essential element of their case, Bell and Richter are entitled to summary judgment as a matter of law. DLH, Inc., 566 N.W.2d at 71.
V
Appellants argue that a genuine issue of material fact exists as to whether respondents Evjes, Atkins, and Richter violated the Consumer Fraud and Deceptive Trade Practices Acts, which governs
The act, use, or employment by any person of any fraud, false pretense, false promise, misrepresentation, misleading statement or deceptive practice, with intent that others rely thereon in connection with the sale of any merchandise, whether or not any person has in fact been misled, deceived, or damaged thereby.
Minn. Stat. § 325F.69, subd. 1 (2006). The term "merchandise" includes real estate. Minn. Stat. § 325F.68, subd. 2 (2006). An individual engages in deceptive trade practices when, "in the course of business, vocation, or occupation" the person "engages in any . . . conduct which creates a likelihood of confusion or of misunderstanding." Minn. Stat. § 325D.44, subd. 1(13) (2006).
This argument is essentially a recasting of appellants' fraudulent-misrepresentation argument and suffers from the same evidentiary deficiencies. Therefore, our analysis of that issue applies here.
VI
Appellants' final argument challenges the district court's refusal to permit them to rescind the purchase agreement. "A contract is voidable if a party's assent is induced by a fraudulent misrepresentation on which the party is justified in relying." MCC Invs. v. Crystal Props., 415 N.W.2d 908, 911 (Minn.App. 1987), review denied (Minn. Feb. 12, 1988). Because appellants have failed to produce any evidence of fraudulent inducement, the district court did not err in granting summary judgment.